Cambridge International Examinations

Cambridge Ordinary Level

* 0 4 1 8 0 5 8 3 8 7 *

COMMERCIAL STUDIES 7101/12

Paper 1 Elements of Commerce October/November 2016
2 hours
Candidates answer on the Question Paper.
No Additional Materials are required.

READ THESE INSTRUCTIONS FIRST

Write your Centre number, candidate number and name on all the work you hand in.
Write in dark blue or black pen.
You may use an HB pencil for any diagrams, graphs or rough working.
Do not use staples, paper clips, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.

Section A
Answer three questions.

Section B
Answer all the questions.

The businesses described in this Question Paper are entirely fictitious.

At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.

This document consists of 18 printed pages and 2 blank pages.

DC (RW/SG) 120164/1
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SECTION A

Answer three questions from this section.

1 Trade and aids to trade help to satisfy human wants in home and international trade through
channels of distribution.

(a) Explain what is meant by:

(i) trade

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(ii) aids to trade

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(iii) human wants

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(b) A typical channel of distribution used in home trade is:

Manufacturer Wholesaler Retailer Consumer

(i) Explain three effects which might arise from manufacturers selling directly to retailers
without the services of wholesalers.

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(ii) Explain the term ‘breaking bulk’.

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(iii) Why is the channel of distribution not complete until it ends with the consumer?

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(iv) Using the box below, draw another channel of distribution chart that might be used in
international trade.

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2 Tuckers Ltd is a limited company that produces and supplies tea and coffee for export.

(a) (i) Explain two features of a limited company.

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(ii) State two functions of the production department of a limited company.

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(b) Explain two reasons why it might be better for this business to operate as a public limited
company rather than as a private limited company.

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(c) Tuckers Ltd uses sea transport to export its tea and coffee.

(i) Why would Tuckers Ltd use sea transport?

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(ii) Explain one difference between moving goods by cargo liner and moving goods by tramp
ship.

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(d) Explain the reasons for the importance of bonded warehousing to Tuckers Ltd.

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3 Amsure Insurance Company provides customers with insurance services. Telephone and email
are used by customers to contact Amsure Insurance Company.

(a) (i) Name two other electronic methods of communication that could be provided by Amsure
Insurance Company.

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(ii) Explain one benefit to Amsure Insurance Company of providing a telephone service.

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(iii) Explain why customers might make an enquiry by email rather than by telephone.

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(b) Explain why people might obtain quotations from different insurance companies.

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(c) Explain two factors that Amsure Insurance Company must consider before accepting a
proposal form.

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(d) Name and describe two Post Office services that might be used by an insurance company to
keep in contact with customers.

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4 Mrs Salah owns a store that supplies garden furniture. She wishes to obtain a bank loan of $20 000
to build a new warehouse and carry out some advertising.

(a) (i) State two features of a bank loan.

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(ii) List three factors Mrs Salah might consider before she applies for the bank loan.

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(iii) Explain the circumstances in which Mrs Salah might make use of an overdraft.

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(b) Explain why a warehouse would be important to Mrs Salah’s business.

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(c) Mrs Salah needs to attract customers to her garden furniture store.

(i) Explain why Mrs Salah has decided to advertise on local radio.

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(ii) Why has she decided not to use plastic bags for advertising?

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5 When businesses trade with each other they use a range of documents.

(a) (i) Why do businesses send catalogues to their customers?

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(ii) Explain one function of an invoice.

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(iii) Describe two documents sent to customers after the invoice.

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(b) Name and describe a transport document that would be used when goods are sent by:

(i) road transport

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(ii) air transport

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(c) Explain why different documents are needed for international trade and home trade.

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Please turn over for Section B

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SECTION B

Answer both questions in this section.

6 Fig. 1 shows the changing percentage shares of the total retail trade of a country.

1995 2015

2%

7%
5%
22%

14%
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52%
6%
20% 21%
19%

Independent shops Chain stores

Supermarkets Department stores

Mail Order Online shopping

Fig. 1

Use Fig. 1 to help you answer the following questions.

(a) (i) Identify one other type of retailer not shown in Fig. 1.

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(ii) If the total retail trade in 1995 was $800 billion, calculate the total amount spent on
department store shopping in 1995. Show your working.

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(iii) Calculate the percentage share of independent stores in 2015. Show your working.

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(b) Describe three characteristics of chain stores.

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(c) Explain how the packaging of goods helps supermarkets to promote their sales.

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(d) Discuss the reasons why many retailers are now offering online shopping.

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7 Fig. 2 shows a country’s trade with the rest of the world in 2015.

Value of Export/Import Trade 2015

Category Exports ($bn) Imports ($bn)

Raw materials 7.25 10.25
Fuels 5.80 9.90
Food 13.00 15.00
Manufactured goods 44.20 15.75
Semi-manufactured goods 26.75 18.50
Other goods 4.00 12.60
Tourism 8.80 5.30
Education services 6.20 8.10

Fig. 2

Use Fig. 2 to help you answer the following questions.

(a) Which category has the highest value of exports?

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(b) Calculate the total value of invisible imports. Show your working.

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(c) Explain the term ‘balance of trade’.

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(d) Explain why a country imports goods.

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(e) Banks and Customs Authorities have an important role in international trade.

(i) Describe two methods by which banks can help exporters to receive payments from
importers.

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(ii) Explain two ways that Customs Authorities enforce restrictions on imported and exported
goods.

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© UCLES 2016 7101/12/O/N/16